Charting a bull-bear battle, S&P 500 challenges 200-day average
Focus: Nasdaq violates 200-day average amid 10% correction
Technically speaking, the major U.S. benchmarks have turned lower, pressured amid a damaging two-week downdraft.
In the process, the S&P 500 is challenging its 200-day moving average, a widely-tracked longer-term bull-bear fulcrum. The charts below add color:
Editor’s Note: As always, updates can be directly accessed at chartingmarkets.substack.com.
Before detailing the U.S. markets’ wider view, the S&P 500’s hourly chart highlights the past four weeks.
As illustrated, the S&P 500 has reached a genuinely significant technical test.
Specifically, the index is challenging its 200-day moving average, currently 5,732, an area also detailed on the daily chart.
As always, the 200-day moving average is a widely-tracked longer-term trending indicator. The quality of the rally attempt from this area will likely add color.
Meanwhile, the Dow Jones Industrial Average has pulled in to seven-week lows.
Its prevailing downturn has been orderly, by comparison, punctuated by consecutive lower plateaus. Tactically, the 43,100 area marks an overhead inflection point.
Against this backdrop, the Nasdaq Composite has registered the most damaging downturn. At least from a technical standpoint.
As illustrated, the index has tagged five-month lows, violating its 200-day moving average, currently 18,400.
(On a granular note, the prevailing downturn has also largely trended under the 20-hour moving average (in black) signaling persistent bearish momentum.)
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has plunged to five-month lows, pressured amid an aggressive two-week downdraft.
Amid the downturn, the index has violated its 200-day moving average, currently 18,400, raising the flag to a potential longer-term trend shift. Tactically, a swift reversal back atop the 200-day would place the brakes on bearish momentum.
Looking elsewhere, the Dow Jones Industrial Average has strengthened versus the other benchmarks, thus far maintaining its four-month range.
Still, market bears will point to a developing double top — the M formation — defined by the December and January peaks. An eventual violation of the January low (41,845) would punctuate the bearish pattern.
Against this backdrop, three downside inflection points area crammed together:
The 200-day moving average, currently 41,910.
The January low (41,845).
Major support around 41,760.
Combined, the 41,760-to-41,910 area marks an important floor. An eventual violation would raise the flag to a primary trend shift, opening the path potentially material downside follow-through. The pending retest of this area — to the extent the index pulls in this far — is a “watch out.”
Meanwhile, the S&P 500 has reversed sharply from its record high established just two weeks ago.
The nearly straightline downdraft places two important areas under siege: Major support (5,775) matching its four-month range bottom, and the slightly deeper 200-day moving average, currently 5,732. (Also see the hourly chart.)
The bigger picture
As detailed above, the major U.S. benchmarks have turned lower, pressured amid a damaging two-week downdraft. In the process:
The Dow industrials have pulled in 2,553 points, or 5.7%, from the record high established late last year.
The Nasdaq Composite has dropped 2,135 points, or 10.6%, from its corresponding record high.
The S&P 500 has dropped 409 points, or 6.7%, from its record high established just over two weeks ago.
Against this backdrop, important technical tests remain in play (or within view) across the major benchmarks.
Moving to the small-caps, the iShares Russell 2000 ETF (IWM) has violated its 200-day moving average, extending to seven-month lows.
Tactically, the breakdown point, circa 214, pivots to resistance and is followed by the 200-day moving average, currently 221.90. A reversal back atop these areas would place the small-cap benchmark on firmer technical ground.
Meanwhile, the SPDR S&P MidCap 400 ETF (MDY) has also violated its 200-day moving average, extending to five-month lows.
Here again, the breakdown point (560.90) pivots to resistance, and is closely followed by the 200-day moving average, currently 566.40. A rally back atop these areas would mark a step toward stabilization.
Combined, the small- and mid-cap benchmarks have asserted a bearish longer-term bias pending repairs.
Returning to the S&P 500, the index has turned lower, plunging from record highs established just two weeks ago.
The downturn places two important areas under siege:
Major support (5,775) matching its four-month range bottom (the post-election low).
The slightly deeper 200-day moving average, currently 5,732.
Against this backdrop, the S&P has closed between the two inflection points, notching a four-month closing low.
And as detailed repeatedly, the 5,775 support marks likely last-ditch support for market bulls. (See the Feb. 6 review and Jan. 8 review.)
So based on today’s backdrop, the cross section of these areas — the 5,732-to-5,775 area — marks a consequential technical test.
Downside follow-through would mark a “lower low” — as well as a violation of the 200-day moving average — signaling a potential bearish longer-term trend shift.
Conversely, a swift reversal back to the range — atop the 5,775 inflection point — would preserve a bullish-leaning longer-term bias.
As always, it’s not just what the markets do, it’s how they do it. The prevailing downturn, though directionally sharp, has lacked the internal traits typically sufficient to signal a major trend shift. (Particularly as it applies to market breadth.)
But ultimately price action trumps other indicators.
Broadly speaking, a significant technical test is currently underway. The pending response to the 5,732-to-5,775 area — potentially across the next several sessions — will likely dictate the intermediate-term market tone.
Also see Feb. 20: Charting a stealth breakout attempt, S&P 500 briefly tags record high.
Also see Feb. 6: Charting a market whipsaw, Nasdaq aborbs Deepseek-fueled downdraft.